Ownership Works’ Post

Remember 2008? I was working in commercial real estate, and the economy was tanking. Businesses were failing, people were stressed... Yet, one company was BOOMING. That company is Lowe's Now... Imagine a major recession. Things look bleak... but Lowe's wasn't just surviving, they were thriving! How? Let me tell you their story... Lowe's knew their customers. They understood that even in tough times, people need to fix up their homes. So what did they do? They got creative! Deals, friendly service...they became the go-to, even on a budget. Plus, they had EVERYTHING, whether you were a pro contractor or tackling a new faucet yourself. They saw the opportunity and went for it! They invested in their stores, their people, and their inventory. Just like Lowe's, here's how you can also recession-proof your practice. #fiercesix #f6acquisitions #wellnessrevolution #medspa #wellness

Not your typical week, with distribution very much in headlines following Home Depot's agreement to purchase SRS for ~$18B. According to its presentation "Big Orange" is paying ~16x EBITDA to acquire ~760 branches, ~4,000 trucks, and ~2,600 sales reps to accelerate growth with Pro customers. SRS should compliment its prior acquisitions in this space including Interline Brands, International Designs Group, and HD Supply. Two other quick observations, 1) the multiple appears higher than some other notable WD M&A deals (see table below) but there are of course multiple factors that influence price and multiple, and 2) it is provocative to consider other 'what if' transactions in lines of trade relevant to Home Depot's business and aspirations. Coupled with other recent moves by Home Depot (https://lnkd.in/egP-NMCU) it is clear they are very serious about growing their Pro business.

How doers get more done.

Home Depot's $18.25 billion acquisition of specialty distributor SRS, as reported by CNBC, marks a significant move towards expanding its professional sales segment. This may seem like a high-priced venture, but with the potential for service providers to retain over 90% of their revenue, it's a strategic win-win. As someone who's led a Garden Center, the continued expansion of big-box retailers is a tough pill to swallow. However, consolidation has become an inevitable trend, largely driven by the hefty price tag of technological advancements. With AI in our toolkit, we're poised to reclaim profits from these giants and redistribute wealth more equitably. It's not just a plan; it's the right thing to do. And let's be clear—nothing's going to stand in our way.

When is the right time to file for bankruptcy? For Conn's HomePlus, rumors are swirling as it announces the closing of over 70 stores across 13 states. This decision follows significant financial challenges, including a net loss of nearly $77 million last year and increasing debt obligations. The acquisition of W.S. Badcock exacerbated these issues, leading to liquidity problems and redundant store locations. As I think back on Bed Bath & Beyond's bankruptcy timing, they waited too long to file for bankruptcy with the intent to re-emerge, which limited their restructuring options and led to more severe financial distress. With declining sales and profitability, significant missteps about merchandising brands vs private labels, and a lack of understanding of the brand and its' customers, it was over. What factors do you consider with an underperfoming business? #Retail #Bankruptcy #BusinessStrategy #Conns #BedBathAndBeyond #RetailTransformation

Reflecting on my most thrilling project of 2023! Last summer, I helped a local investor acquire an $11.5 MM, 66,000 SF retail parking asset situated at the prominent corner of Roosevelt and State Street in Chicago’s South Loop, a deal with strong investment attributes but a ton of deal complexities. The property was anchored by two anchor tenants, each with some uncertain attributes. One, a next-generation Walgreens store, a novel concept initiated in Chicago in early summer 2023 which has a distinctly different layout and design from traditional Walgreens stores, which presented a higher risk for ownership—if the concept fails, the landlord stood to lose its anchor. Second, Formula Fitness Club, still recovering from a tremendous Covid revenue hit and facing an uncertain stabilization trajectory. The opportunity was only available via an auction, with all due diligence performed up front, and no certainty of where the price might land. The deal required meticulous planning and risk assessments to ensure that the buyer was aware of the investment path forward in the event of the acquisition. I had to perform substantial diligence based on a variety of proforma return calculations for my client without knowing the ultimate price. This work included: - Modeling cash flow over 10 years and evaluating reserve needs under various scenarios including potential loss of one or both anchors. - Assessing operating expenses to pinpoint areas of risk and potential savings. - Validating assumptions on future tax liabilities and tax reduction strategies. - Confirming assumptions regarding vacancies, leasing rates, and tenant improvement requirements. After a stressful bidding process down to the last minute, we won the auction! The upfront work paid off; the day after closing we had a team ready to go and a plan ready to be implemented. It’s been six months since the closing and ownership has successfully implemented key aspects of the plan: reducing property taxes, securing two new tenants, and working with existing tenants to ensure they not only survive, but thrive. Greenstone Partners #chicagorealestate #dealstory #auction #chicagobrokers

Albion CIO Jason Ware, MBA, BFA™ joined CNBC this morning to discuss home improvement stocks The Home Depot (HD) and Lowe's Companies, Inc. (LOW), traversing the businesses, the trends we're seeing, and why we like one over the other. Ware: "While both are good companies, Home Depot collects over +80% more annual revenue than Lowes but with only +30% more stores - they have better efficiency per square foot - and so we view this as just one example of why Home Depot is the superior operator in the space." WATCH the entire interview for more, including why Ware remains bullish longer-term on both the name and US housing. #investing #wealthmanagement #portfoliomanagement https://lnkd.in/gxGQZp8Z

Here's tip #6 when negotiating a retail lease from our guest Bethany Babcock, Founder and Principal at Foresite Commercial Real Estate. Listen to the episode: https://buff.ly/4aXV0oo Read the full interview here: https://buff.ly/3tV6PLq Watch and subscribe: https://buff.ly/3Sj14QT 6. Renewal options that exceed the base year in length are a financial instrument for the tenant is a hedge against inflation for them. They cost the landlord more than they gain from the lease and it can limit their value. When we talked about number 1., those were fixed renewal options, any renewal option will do that. It's really important and it means that the tenant has the right to exercise control, and the landlord can't do anything about it. Knowing and understanding that options will always benefit the tenant is important. They never benefit the landlord, but I think that gets confused a lot of times and they get thrown in there. Walgreens is a great example, you'll have a deal where they'll have a 75-year lease, and they'll have 75 one-year options. That's difficult because they can renew one year at a time, you'll never be able to get financing, you'll never be able to sell that deal. #Bethanybabcock #CRE #crei #leasenegotiation #NNN #NNNleases #retail #tenant #ti

SCEF closed on a new acquisition this week, details on this one coming soon! We continue to pursue new acquisitions in line with our investment strategy so if you've got something that fits, don't hesitate to reach out to us. Acquisition criteria listed here, please contact Sam Cooper with inquiries. Big Box Redevelopment Sites: 10-50,000sf. (former department stores that have opportunities for pad developments are a plus)   Single Net: o       Bank Branches with a maximum of 2 years term left. o       QSRs with a maximum of 2 years term left or can be vacant.  o       No options remaining or options at FMV o       Strong site fundamentals o       Above market CAP rates   Multi-Tenant: o        Value to be realized through lease up. o         Size: 10,000 - 30,000 sq.ft. o         Below market rents preferred o         Strong retail density in immediate market   o         Above Market Cap Rates   Location: Mid-Atlantic, Mid-West, Southeast Density: Minimum 20,000 people in 5 miles with $50,000 median household income ·                    Price: $100,000 to $5,000,000 #qsr #commercialrealestate #shoppingcenter #retailrealestate

Facing increased operational costs, many retailers like Walgreens are transitioning from owning to leasing stores, aiming at reducing the number of fixed assets on their balance sheets. This is a significant market shift that may necessitate a closer look. If you're an investor or a property owner, how does this trend impact your real estate decisions? Have you considered the implications on long-term profitability, property management, or market stability? This is a complex issue that entails a strategic and informed approach. Connect with a knowledgeable #RealEstateAgent who can shed light on these changes and help you navigate this evolving landscape to optimize your property investments. Don't overlook the intricacies of these market changes. Give us a call to dive into this and other relevant topics impacting the #Houston, #Texas real estate market. Get the expert perspective you need to make informed decisions. #RealEstate #HomeschoolAndRealEstate #Property #Apartment